What’s new? Jumbo published H1 results and it would not be Jumbo if these did not include contradictory messages.
• Revenues/EBITDA/net income grew +13%/+12%/+17% yoy in H1. Management reiterated full year guidance (possibly at the high end), which combined with the August trading statement (8M sales +11% yoy) it implies revenues will go down by 7% in the remaining 4 months of the year, while net income will go down by -22% yoy overall in H2.
• Management announced a special dividend of E0.38/share (2.7% yield) while committing on the same yoy ordinary dividend of E0.77/share (5.4% yield), despite stressing the ongoing uncertainty, volatile market conditions and headwinds ahead.
• Which is the reason why it has postponed investment decisions for 2024, citing uncontrolled increase in costs. But still going through with 1 new store in Romania in 2022 and 2 more in 2023.
Conclusion: we reiterate OI on a PT of E21.5 (unchanged). We believe there is upside risk to the company’s guidance for 2022, not incorporated in our estimates. We continue to recommend Jumbo for its successful business model, strong balance sheet, cash flow generation and dividend policy. All currently priced at 6.9x EPS (x-cash), 4.6x EBITDA and 8% FCFE yield 2023E.

What’s new? Jumbo released its trading statement for August 2022 showing accelerating sales growth rates compared to the previous two summer months (June-July). We calculate it would take -7% sales growth in the remaining 4 months of 2022 to confirm management’s upper guidance for +2%-5% FY 2022 sales growth yoy. But we expect the strong tourist season has put more money in the pockets of consumers than previously expected. And this should help them endure the inflation/energy crisis.

What’s new? Inspired by IMF’s recent blog, that places Greece among the 5 least affected EU countries from a full Russian gas cutoff, we outline our thoughts and arguments below as to why Greece is probably a better investment case than what is implied by the energy crisis, inflation- recession fears, and the ongoing impact from the pandemic.

Conclusion. Our base case scenario is that a) Greece can avoid a recession in 2023-2024 even if the war in Ukraine continues beyond 2022 and Russia cuts off the gas supply to Europe entirely; b) Greek banks should be net gainers from higher interest rates; c) ECB will continue to support the sovereign, lifting its chances to earn investment grade rating and d) New Democracy will win the elections whenever these take place (early or on time).

OI picks plus DOI picks at lower prices. In this context, we recommend investors own NBG, Alpha, OPAP, PPC, Jumbo and Motor Oil (our OI rated names) and consider OTE and Hellenic Exchanges below E16.0/share and E3.0/share respectively. We also reiterate our suggestions, flagged in our mid-year strategy update on June 2022 (‘War on Equities’), to switch from TEN (post M&A) and MYT to MOH and PPC; from ELPE to MOH; and from SAR and Fourlis to Jumbo.

What’s new? Jumbo released its trading statement for June 2022 showing accelerating sales growth rates compared to the previous month. June performance is more telling given its strong -revenge spending- comparable of last year. At least this is what Jumbo claims. At this pace, the company will beat its own guidance for full year sales growth of +2-5% yoy.

Imagine someone is cutting off your energy/gas supply (QE) while pounding you with heavy artillery weapons (interest rates). The focus is on surviving the war with the help of your allies (ECB)*. Our mid-year strategy report is about which equities can get through stagflation with the least casualties. As we noted in our Feb note: ‘’ […] risk aversion will show up here too. And when it does, fundamentals will be the differentiating factor.’’

Getting through the crisis

We recommend you own OPAP, Jumbo, PPC, Alpha Bank, ADMIE; since our Feb note, we have added NBG and Motor Oil. Investors should consider adding OTE below E16; also, switch from TEN to MOH, PPC and/or ADMIE; from ELPE to MOH; from MYT to PPC; and from SAR and Fourlis to Jumbo. We favor cash flow generation and dividend yielders; energy infrastructure plays; plus, interest rate and oil price winners.

Early elections?
It is becoming consensus view the govt will go for early elections in Sep-Dec this year instead of July 2023 to a) preempt worsening macro conditions next year and b) to make sure political instability does not get in the way of the sovereign earning investment grade. The only positive market scenario would be for this government to be re-elected. This is our base case.

There will be two election rounds: the first one, lacking bonus seats for the first party, will surely yield a hung parliament; while the second round, could require a two-party coalition. The ruling party needs 37%-38% of second round votes vs. 31%-36% fetched in current polls.

The power of higher discount rates
Call it multiples de-rating or DCF hurdle rates going up. It is the same thing. With interest rates on the rise, the valuation on equities is going down. Banks can decouple given a) their CoE was elevated prior to monetary tightening and b) their NII and equity stand to benefit from higher interest rates – on the conditionality inflation does not dislocate asset quality.

10.9x P/E and 6.4x EV/EBITDA 2023E
Are the trading multiples of our Greek universe** (excl. banks). Down from 15.1x earnings and 6.7x EBITDA in 2022E terms (driven by energy stocks); slightly down vs 15.5x P/E and 7.4x EBITDA in Feb on 8% lower market cap (and +6% EPS revision). Banks trade 0.37x TBV 2023E down from 0.56x TBV in our Feb note, with our estimates broadly unchanged.

The calls that have not worked
Compared to our February strategy note: our OI calls on PPC, ADMIE Holdings and Alpha Bank have not worked. But, except for PPC (taxes, receivables), the miss is not attributed to weaker fundamentals or a change in strategy. Within our DOI calls, Terna Energy and Hellenic Bank have had a great performance on M&A grounds.

*Metaphorically speaking / with the utmost respect to the war raging in Ukraine

**Prices as of June 17